Positive news from BDO and Lloyds PMI surveys

BUSINESSES’ intentions to take on new staff have reached their highest level in 16 years, a survey has said.

The Business Trends report by accountants and business advisers BDO indicates that job creation will continue to accelerate for the remainder of the year.  It says there was a significant surge in hiring intentions among service firms during July, spelling good news for the career prospects of recent graduates.

The services sector also positively influenced the BDO Output Index, which predicts companies’ performance three months ahead. Economy-wide output rose from 103.6 in June to 103.7 in July.

The firm’s Optimism Index, which predicts businesses’ expectations over the next six months rose from 104.8 in June to 105.1 in July, as both services and manufacturing firms reported gains.

Inflationary pressure is likely to be a key reason behind the longstanding levels of confidence among businesses. The BDO Inflation Index remained broadly unchanged at 97.6 in July, far below the long term average of 100 and only just above the 95 mark that indicates costs are rising. Labour-intensive services firms in particular continue to benefit from weak cost pressures, as spare capacity in the economy undermines wage growth.

Tim Entwistle, partner and head of BDO in the North West welcomed the positive jobs news, but expressed concern over potential skills shortages in both the service and manufacturing sectors.

He sais: “To address this, the Government must ensure its protectionist tendencies are put on hold until productivity returns to pre-crisis levels. Although a new wave of graduates will go some way towards meeting businesses’ needs, readily available and flexible labour from Europe could relieve pressure on businesses in the short term.”

Meanwhile, there was further positivity as the Lloyds Bank North West PMI survey reported a strong pick-up in output in July, with a “marked rise” in new business and employment increasing for a 15th month.

Martyn Kendrick, area director of SME Banking in the North West at Lloyds  said: “Output growth accelerated to a seven-month high along with a strong rise in new business…Overall, growth in the North West was broad-based across the manufacturing and service sectors and is likely to be sustained over the coming months.”